Small businesses operating online require contractual and regulatory protection from potential collusion between traditional retailers and online magnates such as Google, according to the Council of Small Business of Australia (COSBOA).

COSBOA executive director, Peter Strong, told attendees of the Federal Government's Online Retail Forum that the industry body feared moves by bricks-and-mortar retailers to push out small businesses could easily translate to the online world.

"At the moment in the real world, Centro and Westfields and councils get together and make sure everyone has to shop in those places," he said.

"We're concerned that might happen on the web as well... people say it's happening already."

Strong implied such moves could directly involve Google and other search engines altering search algorithms to preference larger retailers at their request, squeezing out smaller businesses attempting to circumvent traditional measures to make profits online.

"If China can stop people looking at things, so can we and so can Westfields," he said.

Small business minister, Senator Nick Sherry, told Computerworld Australia that the issue would likely be dealt with in the recently opened inquiry into the online retail sector by the Productivity Commission.

Strong's comments came as a group of successful online businesses engaged in a panel discussion at the forum to contemplate the benefits of online retailing.

Mike Knapp, co-founder of online shoe retailer Shoes of Prey, said the business had been born out of a search for a unique niche industry that could be sold directly to customers.

"One of the key learnings for us is that if you try to sell other people's brands... it becomes a race to the bottom... in terms of price on the internet," he said.

The company has embraced PayPal "one hundred per cent", leaving Knapp to warn major Australian banks that their lack of innovation and speed in payment collections were pushing small businesses online for almost every aspect of the sales chain.

However, Cameron Poolman, group managing director of auction site Grays Online, said that even in the online world, the small Australian consumer effectively meant there was no room for a second best.

"You've got to be the cheapest or thereabouts to sell your product," he said. Nevertheless, online retailers' ability to collect vast amounts of consumer knowledge ultimately provided a leg up in competition with traditional retailers.

The retail forum, established by the Department of Broadband, Communications and the Digital Economy, is part of a wider ploy by the government to focus on e-commerce and Australia's digital economy, a strategy that also includes new legislation to promote business involvement online.

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